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INSIGHTS / THE BIG PICTURE

In China's frothy tea drink universe, startups learn to battle

China · Sep 12, 2019 · By Hua Nan

Tea shop startups like Nayuki and Heytea are staying afloat by turning to high-quality organic ingredients and greater brand visibility 

Within a few months of its launch in Zhengzhou in early 2018, Answer Tea rocketed to internet fame as the latest, trendiest go-to bubble tea in China. The startup's short videos using the Douyin app drew almost 1.2m likes from 350,000 fans. The popularity brought quick business expansion. By mid-March, Answer Tea had signed 249 franchisees and, within a year, opened 500 stores in 27 provinces. 

Answer Tea’s main selling point is its "fortune-telling" service. Customers write a random question on a cup sleeve, order their drink, then get the drink back with the answer to their questions floating in edible ink on the foam on top of the drink. The answer comes from Answer Tea's big data system, which extracts key words from the question to find a matching answer for the customer. 

The market for tea shops and brands in China is worth RMB 90bn, and that figure is expected to exceed RMB 100bn by the end of this year. However, despite its rapid expansion, Answer Tea is today battling to hold onto its slice of China's hyper-competitive tea drink market that has emerged in recent years.

According to food-delivery and ticketing company Meituan-Dianping and market research and consulting company iResearch, the number of tea beverage shops in China had climbed to 450,000 by the end of 2018, a 74% increase over 2017. Market research firm JingData reported that 15 tea drink brands had finished investment funding rounds by December 2018.

Just a few decades ago, tea in China came loose-leaf in boiling hot water with few, if any, adornments. Today, the profusion of alternative tea drinks makes for a bustling but also crowded market.

 

Edited by S. Mani and Vincent J Morkri

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